AAVE decentralized loan protocol processed millions in liquidations on Monday without accumulating any new uncollectible debt, showing its resistance during market volatility, according to data from the Chaos laboratories.
The cryptographic market wilt early, with the price of Bitcoin (BTC) falling to almost $ 91,000 of $ 100,000 as concerns of a renewed commercial war between the United States and its main partners Canada, Mexico and China sent shock waves to through financial markets. The slide was invested later a day after President Donald Trump stopped tariffs in Mexico for 30 days.
The solid action in the price of two ways led to the scarcity of margin, which resulted in mass settlements, the forced closure of centralized and decentralized commercial roads. Aave only prosecuted $ 210 million in liquidations, its highest account of a single day from the blockade of August 5, according to the data. More importantly, the protocol avoided assuming new uncollectible debts.
The protocol accumulates an uncollectible debt when the borrowers do not pay their loans and the guaranteed guarantee is insufficient to cover the pending amounts. The risk is higher during volatile market conditions, such as Monday, when the price and low demand decrease they hinder the effective liquidation of the warranty.
“The liquidations were executed efficiently throughout the protocol, most of which were carried out in the main instance of Ethereum. The robust risk management mechanisms within AVE assured that the collateralized positions were established as planned, minimizing the Protocol losses, “Chaos Labs said in X.
AAVE essentially performed the market stress test, demonstrating the efficiency of its risk control measures and liquidation mechanisms. Its existing unknown debt even decreased by 2.7% due to the fall in the value of debt assets.
Defi pseudonym observer read the performance of AAVE as evidence of the solid decentralized finance base, which includes “rigorous collateral selection and management through governance, an efficient protocol design for liquidations, thick liquidity groups in the ecosystem”.
Imminent updates such as AAVE V3.3, V4 and Umbrella updates indicate a promising future for the Defi industry, said Leo.
Version 3.3, announced in December, introduces a function to register and eliminate non -collateralized uncolterized debts of the liquidations, allowing an umbrella, an automated debt management system, to handle the risk and lower protocol responsibilities. The version also helps control the accumulation of the so -called dust debt, which are small amounts of debt that are difficult to clear or liquidate due to its insignificant value.
